UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 _____________________ FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2006 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from___to____________________ Commission file number 001-16767 Westfield Financial, Inc. (Exact name of registrant as specified in its charter) Massachusetts 73-1627673 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 141 Elm Street, Westfield, Massachusetts 01086 (Address of principal executive offices) (Zip Code) (413) 568-1911 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . --- --- Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. Large accelerated filer___ Accelerated filer X Non-accelerated filer ___ --- Indicate by check mark whether the registrant is a shell company. Yes No X --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. Outstanding at Class May 4, 2006 - ----------------------------------- ---------------------------------- Common Stock, par value $0.01 9,689,757
TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Item 1. Financial Statements of Westfield Financial, Inc. and Subsidiaries Consolidated Balance Sheets (Unaudited) - March 31, 2006 and December 31, 2005 Consolidated Statements of Income (Unaudited) - Three months ended March 31, 2006 and 2005 Consolidated Statement of Changes in Stockholders' Equity and Comprehensive Income (Unaudited) - Three Months ended March 31, 2006 and 2005 Consolidated Statements of Cash Flows (Unaudited) - Three Months ended March 31, 2006 and 2005 Notes to Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures PART II - OTHER INFORMATION Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Item 3. Defaults upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits Signatures Exhibits
1 FORWARD - LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains "forward-looking statements. These forward-looking statements are made in good faith pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. the words "may," "could," "should," "would," "believe," "anticipate," "estimate," "expect," "intend," "plan" and similar expressions are intended to identify forward-looking statements. These forward-looking statements may be subject to significant known and unknown risks, uncertainties, and other factors, including, but not limited to, changes in the real estate market or local economy, changes in interest rates, changes in laws and regulations to which we are subject, and competition in our primary market area. Although we believe that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from the results discussed in these forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Westfield Financial undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
2 PART I ITEM 1. FINANCIAL STATEMENTS Westfield Financial, Inc. and Subsidiaries Consolidated Balance Sheets - Unaudited (Dollars in thousands except share data) <TABLE> <CAPTION> March 31, December 31, 2006 2005 ---- ---- <S> <C> <C> ASSETS Cash and due from banks $ 12,258 $ 18,136 Federal funds sold 19,869 5,090 Interest-bearing deposits and other short term investments 5,295 3,230 -------- -------- Cash and cash equivalents 37,422 26,456 -------- -------- SECURITIES: Available for sale - at estimated fair value 30,216 28,321 Held to maturity - at amortized cost (estimated fair value of $72,104 in March 2006 and $72,704 in December 2005) 73,291 73,323 MORTGAGE-BACKED SECURITIES: Available for sale - at estimated fair value 106,651 101,138 Held to maturity - at amortized cost (estimated fair value of $144,530 in March 2006 and $149,017 in December 2005) 148,504 152,127 FEDERAL HOME LOAN BANK OF BOSTON AND OTHER STOCK 4,237 4,237 LOANS - Net of allowance for loan losses of $5,529 in March 2006 and $5,422 in December 2005 380,590 378,837 PREMISES AND EQUIPMENT - Net 11,546 11,048 ACCRUED INTEREST RECEIVABLE 3,980 3,853 BANK OWNED LIFE INSURANCE 20,013 19,819 OTHER ASSETS 6,121 5,936 -------- -------- TOTAL ASSETS $822,571 $805,095 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES DEPOSITS: Noninterest-bearing $ 40,255 $ 45,260 Interest-bearing 598,772 577,785 -------- -------- Total deposits 639,027 623,045 -------- -------- CUSTOMER REPURCHASE AGREEMENTS 15,968 14,441 FEDERAL HOME LOAN BANK OF BOSTON ADVANCES 45,000 45,000 OTHER LIABILITIES 7,561 6,767 -------- -------- TOTAL LIABILITIES 707,556 689,253 -------- -------- STOCKHOLDERS' EQUITY: Preferred stock - $.01 par value, 5,000,000 shares authorized, none outstanding at March 31, 2006 and December 31, 2005 -- -- Common stock - $.01 par value, 25,000,000 shares authorized, 10,580,000 shares issued, 9,689,757 and 9,754,757 shares outstanding at March 31, 2006 and December 31, 2005, respectively 106 106 Additional paid-in capital 48,159 48,020 Unallocated common stock of Employee Stock Ownership Plan (5,054) (5,127) Unearned compensation (768) (861) Retained earnings 93,529 92,789 Accumulated other comprehensive loss (1,466) (1,177) Treasury stock, at cost (890,243 shares at March 31, 2006 and 825,243 December 31, 2005) (19,491) (17,908) -------- -------- Total stockholders' equity 115,015 115,842 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $822,571 $805,095 ======== ======== See accompanying notes to consolidated financial statements. </TABLE>
3 Westfield Financial, Inc. and Subsidiaries Consolidated Statements of Income - Unaudited (Dollars in thousands, except per share data) <TABLE> <CAPTION> Three Months Ended March 31, 2006 2005 ---- ---- <S> <C> <C> INTEREST AND DIVIDEND INCOME: Residential and commercial real estate loans $ 4,104 $ 3,794 Debt securities, taxable 3,310 2,894 Debt securities, tax-exempt 308 297 Consumer loans 114 195 Commercial and industrial loans 1,718 1,407 Federal funds sold 210 171 Marketable equity securities 109 90 Interest-bearing deposits and other short term investments 55 30 -------- -------- Total interest and dividend income 9,928 8,878 -------- -------- INTEREST EXPENSE: Deposits 3,667 2,562 Customer repurchase agreements 76 51 Other borrowings 407 350 -------- -------- Total interest expense 4,150 2,963 -------- -------- Net interest and dividend income 5,778 5,915 PROVISION FOR LOAN LOSSES 75 140 -------- -------- Net interest and dividend income after provision for loan losses 5,703 5,775 -------- -------- NONINTEREST INCOME: Income from bank owned life insurance 195 177 Service charges and fees 658 571 -------- -------- Total noninterest income 853 748 -------- -------- NONINTEREST EXPENSE: Salaries and employee benefits 2,999 2,728 Occupancy 495 471 Computer operations 395 393 Stationery, supplies and postage 117 144 Other 788 846 -------- -------- Total noninterest expense 4,794 4,582 -------- -------- INCOME BEFORE INCOME TAXES 1,762 1,941 INCOME TAXES 449 430 -------- -------- NET INCOME $ 1,313 $ 1,511 ======== ======== EARNINGS PER COMMON SHARE: Basic $ 0.14 $ 0.16 Diluted $ 0.14 $ 0.16 See accompanying notes to consolidated financial statements. </TABLE>
4 WESTFIELD FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Dollars in thousands, except share amounts) <TABLE> <CAPTION> Common Stock Restricted Accumulated ---------------- Additional Unallo- Stock Other Treasury Stock Par Paid-In cated Unearned Retained Comprehensive ------------------ Shares Value Capital ESOP Compensation Earnings Income (Loss) Shares Amount Total ------ ----- ---------- -------- ------------ -------- ------------- ------ ------ ----- <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> BALANCE, DECEMBER 31, 2004 10,580,000 $106 $47,659 $(5,427) $(1,543) $90,399 $ (122) (625,488) $(13,021) $118,051 Comprehensive income: Net income -- -- -- -- -- 1,511 -- -- -- 1,511 Unrealized losses on securities arising during the year, net of tax benefit of $337 -- -- -- -- -- -- (532) -- -- (532) -------- Comprehensive income 979 -------- Activity related to common stock issued as employee incentives -- -- 25 -- 113 -- -- -- -- 138 Cash dividends declared ($0.10 per share) -- -- -- -- -- (401) -- -- -- (401) ---------- ---- ------- ------- ------- ------- ------- -------- -------- -------- BALANCE MARCH 31, 2005 10,580,000 $106 $47,684 $(5,427) $(1,430) $91,509 $ (654) (625,488) $(13,021) $118,767 ========== ==== ======= ======= ======= ======= ======= ======== ======== ======== BALANCE DECEMBER 31, 2005 10,580,000 $106 $48,020 $(5,127) $ (861) $92,789 $(1,177) (825,243) $(17,908) $115,842 Comprehensive income: Net income -- -- -- -- -- 1,313 -- -- -- 1,313 Unrealized losses on securities arising during the year, net of tax benefit of $167 -- -- -- -- -- -- (289) -- -- (289) -------- Comprehensive income 1,024 -------- Activity related to common stock issued as employee incentives -- -- 139 73 93 -- -- -- -- 305 Treasury stock purchased -- -- -- -- -- -- -- (65,000) (1,583) (1,583) Cash dividends declared ($0.15 per share) -- -- -- -- -- (573) -- -- -- (573) ---------- ---- ------- ------- ------- ------- ------- -------- -------- -------- BALANCE, MARCH 31, 2006 10,580,000 $106 $48,159 $(5,054) $ (768) $93,529 $(1,466) (890,243) $(19,491) $115,015 ========== ==== ======= ======= ======= ======= ======= ======== ======== ======== See accompanying notes to consolidated financial statements. </TABLE>
5 Westfield Financial, Inc. and Subsidiaries Consolidated Statements of Cash Flows - Unaudited (Dollars in thousands) <TABLE> <CAPTION> Three Months Ended March, 2006 2005 ---- ---- <S> <C> <C> OPERATING ACTIVITIES: Net Income $ 1,313 $ 1,511 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 75 140 Depreciation and amortization of premises and equipment 253 237 Net amortization of premiums and discounts on securities, mortgage backed securities and mortgage loans 163 259 Amortization of unearned compensation 419 138 Loss on sale of fixed assets 2 -- Deferred income tax benefit (18) (21) Increases in cash surrender value of bank-owned life insurance (194) (177) Changes in assets and liabilities: Accrued interest and dividends (127) (39) Other assets (1) 356 Other liabilities 794 740 -------- -------- Net cash provided by operating activities 2,679 3,144 -------- -------- INVESTING ACTIVITIES: Securities, held to maturity: Purchases (4,997) (5,016) Proceeds from maturities and principal collections 5,000 6,000 Securities, available for sale: Purchases (5,048) (6,118) Proceeds from calls, maturities, and principal collections 3,000 156 Mortgage-backed securities, held to maturity: Purchases (5,050) (5,113) Principal collections 8,573 10,568 Mortgage-backed securities, available for sale: Purchases (11,414) (10,072) Principal collections 5,546 4,769 Purchase of residential mortgages (9,976) (719) Net decrease (increase) in loans 8,167 (2,945) Purchases of premises and equipment (763) (93) Proceeds from sale of fixed assets 10 -- -------- -------- Net cash used in investing activities (6,952) (8,583) -------- -------- FINANCING ACTIVITIES: Increase in deposits 15,982 3,222 Increase (decrease) in customer repurchase agreements 1,527 (1,280) Purchase of common stock in connection with employee benefit program (114) -- Cash dividends paid (573) (401) Treasury stock purchased (1,583) -- -------- -------- Net cash provided by financing activities 15,239 1,541 -------- -------- NET CHANGE IN CASH AND CASH EQUIVALENTS: 10,966 (3,898) Beginning of period 26,456 51,047 -------- -------- End of period $ 37,422 $ 47,149 ======== ======== See accompanying notes to consolidated financial statements. </TABLE>
6 WESTFIELD FINANCIAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations - Westfield Financial, Inc. (the "Company") is a Massachusetts chartered corporation. The Company has a federally chartered stock savings bank subsidiary called Westfield Bank (the "Bank"). The Bank's deposits are insured to the limits specified by the Federal Deposit Insurance Corporation ("FDIC"). The Bank operates ten branches in Western Massachusetts. The Bank's primary source of revenue is earnings on loans to small and middle-market businesses and to residential property homeowners. Westfield Securities Corporation and Elm Street Securities Corporation, Massachusetts chartered security corporations, were formed by the Company for the primary purpose of holding qualified investment securities. In the third quarter of 2005, the Company dissolved Westfield Securities Corporation in order to streamline operations. Principles of Consolidation - The consolidated financial statements include the accounts of the Company, the Bank, Elm Street Securities Corporation, as well as Westfield Securities Corporation, prior to its dissolution. All material intercompany balances and transactions have been eliminated in consolidation. Estimates - The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses for each. Actual results could differ from those estimates. Estimates that are particularly susceptible to significant change in the near-term relate to the determination of the fair value of financial instruments and the allowance for loan losses. Basis of Presentation - In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the Company's financial condition as of March 31, 2006, and the results of operations, changes in stockholders' equity and comprehensive income and cash flows for the interim periods presented. The results of operations for the three months ended are not necessarily indicative of the results of operations for the remainder of the year ending December 31, 2006. Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2005. Reclassifications - Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation.
7 2. EARNINGS PER SHARE Basic earnings per share represents income available to stockholders divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential shares had been issued or earned. 3. ADOPTION OF SFAS 123 (R) SHARE-BASED PAYMENT On January 1, 2006 Westfield Financial adopted SFAS 123 (R), Share-Based Payment ("SFAS 123 (R)" or the "Statement"), which requires that the compensation cost relating to share-based payment transactions be recognized in financial statements. The effect of SFAS 123 (R) is that entities are required to measure the cost of employee services received in exchange for stock options based on the grant-date fair value of the award, and to recognize the cost over the period the employee is required to provide services for the award. SFAS 123 (R) permits entities to use any option-pricing model that meets the fair value objective in the Statement. The adoption of SFAS 123 (R) by Westfield Financial resulted in additional compensation expense of $73,000 and a related tax benefit of $17,000 for the three months ended March 31, 2006. Had compensation cost been determined based on the fair value at the grant date awards under the plans consistent with the method prescribed by SFAS 123 (R), Westfield Financial's net income and income per share for the three months ended March 31, 2005 would have been adjusted to the pro forma amounts indicated below (in thousands, except per share amounts): <TABLE> <S> <C> Net income as reported $ 1,511 Less: Compensation expense determined under fair value based method for all awards, net of tax effect (68) ------- Pro forma net income $ 1,443 ======= Net income per share Basic as reported $ 0.16 Pro forma 0.15 Diluted as reported 0.16 Pro forma 0.15 </TABLE> 4. PENSION AND OTHER BENEFITS The following table provides information regarding net benefit costs for the periods shown: <TABLE> <CAPTION> Pension Benefits Other Benefits ---------------- -------------- Three months ended March 31, - ---------------------------- 2006 2005 2006 2005 ---- ---- ---- ---- <S> <C> <C> <C> <C> Service cost 181 157 7 8 Interest cost 150 127 12 11 Expected return on assets (149) (131) -- -- Transaction obligation (3) (3) 2 2 Actuarial (gain) loss 11 6 1 -- ---- ---- ---- ---- Net periodic pension cost 190 156 22 21 ==== ==== ==== ==== </TABLE>
8 The Company plans to contribute the amount required to meet the minimum funding standards under Internal Revenue Code Section 412. Additional contributions will be made as deemed appropriate by management in conjunction with the plan's actuaries. For the year 2006, the preliminary estimated contribution is approximately $605,000. As of March 31, 2006 no contribution had been made. 5. RECENT ACCOUNTING PRONOUNCEMENTS Servicing Rights In March 2006, the Financial Accounting Standards Board issued Statement No. 156, Accounting for Servicing of Financial Assets, which amends FASB Statement No. 140. This Statement requires that all separately recognized servicing rights be initially measured at fair value, if practicable. For each class of separately recognized servicing assets and liabilities, this Statement permits an entity to choose either of the following subsequent measurement methods: (1) amortize servicing assets or liabilities in proportion to and over the period of estimated net servicing income or net servicing loss, or (2) report servicing assets or liabilities at fair value at each reporting date and report changes in fair value in earnings in the period in which the changes occur. This Statement also requires additional disclosures for all separately recognized servicing rights, and is effective for new transactions occurring and for subsequent measurement at the beginning of an entity's first fiscal year that begins after September 15, 2006. This Statement is not expected to have a material impact on the Company's consolidated financial statements. ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Overview Westfield Financial strives to remain a leader in meeting the financial service needs of the local community and to provide quality service to the individuals and businesses in the market areas that it has served since 1853. Historically, Westfield Bank has been a community-oriented provider of traditional banking products and services to business organizations and individuals, including products such as residential and commercial real estate loans, consumer loans and a variety of deposit products. Westfield Bank meets the needs of its local community through a community-based and service-oriented approach to banking. In recent years, in addition to real estate lending, we have adopted a growth-oriented strategy that has focused on increased emphasis on commercial lending. Our strategy also calls for increasing deposit relationships and broadening our product lines and services. We believe that this business strategy is best for our long term success and viability, and complements our existing commitment to high quality customer service. In connection with our overall growth strategy, Westfield Bank seeks to: * continue to grow its commercial loan portfolio as a means to increase the yield on and diversify its loan portfolio and build transactional deposit account relationships; * focus on expanding its retail banking franchise, and increasing the number of households served within its market area; and * depending on market conditions, refer substantially all of the fixed-rate residential real estate loans to a third party mortgage company which underwrites, originates and services these loans in order to diversify its loan portfolio, increase fee income and reduce interest rate risk.
9 You should read our financial results for the quarter ended March 31, 2006 in the context of this strategy. * Net income was $1.3 million, or $0.14 per diluted share, for the quarter ended March 31, 2006 as compared to $1.5 million, or $0.16 per diluted share for the same period in 2005. * Net interest and dividend income was $5.8 million for the three months ended March 31, 2006 compared to $5.9 million for the three months ended March 31, 2005. The net interest margin for the three months ended March 31, 2006 was 3.08% compared with 3.21% for the same period in 2005. The decrease in the net interest margin was primarily the result of higher funding costs resulting from the rising interest rate environment. As the rates on term deposits have increased over the past several months, some customers have shifted funds out of core deposits, which generally pay lower rates, and into term deposits. * Commercial real estate and commercial and industrial loans decreased $3.5 million to $266.1 million at March 31, 2006 from $269.6 million at December 31, 2005. Westfield Bank's strategic plan emphasizes commercial lending whereby the Bank seeks out high quality credit relationships. The success of Westfield Bank's commercial lending is primarily dependent on the local and national economy, along with local competition for commercial loans. * Residential real estate loans increased $6.0 million to $113.3 million at March 31, 2006 from $107.3 million at December 31, 2005. Westfield Bank purchased $9.8 million in seasoned, adjustable rate loans, which are serviced by the originating financial institution. This was offset by principal payments and payoffs of other residential loans. Westfield Bank refers its residential real estate borrowers to a third party mortgage company and substantially all of Westfield Bank's residential real estate loans are underwritten, originated and serviced by a third party mortgage company. Westfield Bank receives a fee from each of these loans originated. Westfield Bank believes that this program has diversified its loan portfolio and continues to reduce interest rate risk by reducing the amount of long-term fixed rate loans held in Westfield Bank's loan portfolio. * Total deposits increased $16.0 million to $639.0 million at March 31, 2006 from $623.0 million at December 31, 2005. The increase in deposits was primarily the result of an increase of $29.1 million in term deposits, which were $364.2 million at March 31, 2006. The rates paid on term deposits have increased over the past several months. Some customers have shifted funds out of core deposits, which generally pay lower rates, and into term deposits. Management feels that in a period of rising rates, the more rate sensitive customers will continue to move funds into term deposits, resulting in a higher cost of deposits. * Service charge and fee income for the three months ended March 31, 2006 was $658,000, compared to $571,000 for the three months ended March 31, 2005. Net checking account processing fee income was $463,000 for the three months ended March 31, 2006 as compared to $390,000 for the same period in 2005. * Noninterest expense for the three months ended March 31, 2006 was $4.8 million compared to $4.6 million for the same period in 2005. Salaries and benefits increased $271,000 to $3.0 million for the three months ended March 31, 2006. This was primarily the result of an increase in salary expense of $99,000 related to hiring additional personnel and normal salary increases, a $101,000 increase in employee benefit plan costs, along with an additional expense of $73,000 related to stock options. The Financial Accounting Standards Board now requires public and nonpublic companies to recognize stock-based compensation related to stock options in their income statements. This requirement became effective for Westfield Financial for the fiscal year beginning on January 1, 2006. In previous periods, Westfield Financial was not required to treat stock-based compensation related to stock options as an expense.
10 * Nonperforming loans were $2.1 million at March 31, 2006 and $1.9 million at December 31, 2005. * Charge-offs decreased by $212,000 to $24,000 for the three months ended March 31, 2006 as compared to $236,000 the same period in 2005. This was primarily the result of a decrease of $164,000 in charge-offs on commercial and industrial loans. CRITICAL ACCOUNTING POLICIES Westfield Financial's critical accounting policies given its current business strategy and asset/liability structure are revenue recognition on loans, the accounting for allowance for loan losses and provision for loan losses, the classification of securities as either held to maturity or available for sale, and the evaluation of securities for other than temporary impairment. Westfield Financial's general policy is to discontinue the accrual of interest when principal or interest payments are delinquent 90 days or more, or earlier if the loan is considered impaired. Any unpaid amounts previously accrued on these loans are reversed from income. Subsequent cash receipts are applied to the outstanding principal balance or to interest income if, in the judgment of management, collection of principal balance is not in question. Loans are returned to accrual status when they become current as to both principal and interest and when subsequent performance reduces the concern as to the collectibility of principal and interest. Loan fees and certain direct loan origination costs are deferred, and the net fee or cost is recognized as an adjustment to interest income over the estimated average lives of the related loans. Compensation to an auto dealer is normally based upon a spread that a dealer adds on the loan base rate set by Westfield Financial. The compensation is paid to an automobile dealer shortly after the loan is originated. Westfield Financial records the amount as a deferred cost that is amortized over the life of the loans in relation to the interest paid by the consumer. Westfield Financial's methodology for assessing the appropriateness of the allowance consists of two key components, which are a specific allowance for identified problem or impaired loans and a formula allowance for the remainder of the portfolio. Measurement of impairment can be based on the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's observable market price or the fair value of the collateral, if the loan is collateral dependent. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change. The appropriateness of the allowance is also reviewed by management based upon its evaluation of then-existing economic and business conditions affecting the key lending areas of Westfield Financial and other conditions, such as new loan products, credit quality trends (including trends in nonperforming loans expected to result from existing conditions), collateral values, loan volumes and concentrations, specific industry conditions within portfolio segments that existed as of the balance sheet date and the impact that such conditions were believed to have had on the collectibility of the loan portfolio. Although management believes it has established and maintained the allowance for loan losses at appropriate levels, future adjustments may be necessary if economic, real estate and other conditions differ substantially from the current operating environment. Securities, including mortgage-backed securities, which management has the positive intent and ability to hold until maturity are classified as held to maturity and are carried at amortized cost. Securities, including mortgage-backed securities, which have been identified as assets for which there is not a positive intent to hold to maturity are classified as available for sale and are carried at fair value with unrealized gains and losses, net of income taxes, reported as a separate component of equity. Accordingly, a misclassification would have a direct effect on stockholders' equity. Sales or reclassification as available for sale (except for certain permitted reasons) of held to maturity securities may result in the reclassification of all such securities to available for sale. Westfield Financial has never sold held to maturity securities or reclassified such securities to available for sale other than in specifically permitted circumstances. Westfield Financial does not acquire securities or mortgage-backed securities for purposes of engaging in trading activities.
11 On a quarterly basis, Westfield Financial reviews available for sale investment securities with unrealized depreciation on a judgmental basis to assess whether the decline in fair value is temporary or other than temporary. Declines in the fair value of held to maturity and available for sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other than temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the corporation to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 2006 AND DECEMBER 31, 2005 Total assets increased $17.5 million to $822.6 million at March 31, 2006 from $805.1 million at December 31, 2005. Securities increased $3.8 million to $358.7 million at March 31, 2006 from $354.9 million at December 31, 2005. Commercial real estate and commercial and industrial loans decreased $3.5 million to $266.1 million at March 31, 2006 from $269.6 million at December 31, 2005. The dollar amount of payoffs and paydowns in the commercial real estate and commercial and industrial loan portfolios exceeded the dollar amount of new loans originated in those portfolios. Westfield Bank's strategic plan emphasizes commercial lending. The success of Westfield Bank's commercial lending is primarily dependent on the local and national economy, along with the local competition for commercial loans. Residential real estate loans increased $6.0 million to $113.3 million at March 31, 2006 from $107.3 million at December 31, 2005. Westfield Bank purchased $9.8 million in seasoned, adjustable rate loans, which are serviced by the originating financial institution. This was offset by principal payments and payoffs of other residential loans. Westfield Bank refers its residential real estate borrowers to a third party mortgage company and substantially all of Westfield Bank's residential real estate loans are underwritten, originated and serviced by a third party mortgage company. Westfield Bank receives a fee from each of these loans originated. Westfield Bank believes that this program has diversified its loan portfolio and continues to reduce interest rate risk by reducing the amount of long-term fixed rate loans held in Westfield Bank's loan portfolio. Total deposits increased $16.0 million to $639.0 million at March 31, 2006 from $623.0 million at December 31, 2005. The increase in deposits was primarily the result of an increase of $29.1 million in term deposits, which were $364.2 million at March 31, 2006. Regular savings and money market accounts decreased $14.8 million to $158.8 million at March 31, 2006 from $173.6 million at December 31, 2005. The rates paid on term deposits have increased over the past several months. Some customers have shifted funds out of regular savings and money market deposits, which generally pay lower rates, and into term deposits. Management feels that in a period of rising rates, the more rate sensitive customers will continue to move funds into term deposits, resulting in a higher cost of deposits. Checking accounts increased $1.8 million to $116.1 million. The increase is primarily due to a checking account product which pays higher rates to customers who maintain large balances. Federal Home Loan Bank ("FHLB") borrowings were $45.0 million at both March 31, 2006 and December 31, 2005. Customer repurchase agreements increased $1.6 million to $16.0 million at March 31, 2006 from $14.4 million December 31, 2005. A customer repurchase agreement is an agreement by Westfield Bank to sell to and repurchase from the customer an interest in specific securities issued by or guaranteed by the United States Government. This transaction settles immediately on a same day basis in immediately available funds. Interest paid is commensurate with other products of equal interest and credit risk. All of Westfield Bank's customer repurchase agreements at March 31, 2006 were held by commercial customers.
12 Stockholders' equity at March 31, 2006 and December 31, 2005 was $115.0 million and $115.8 million, respectively, representing 14.0% and 14.4% of total assets, respectively. The change is comprised of net income of $1.3 million for the three months ended March 31, 2006, the net repurchase of 65,000 shares of common stock for $1.6 million and the declaration and payment of the Board of Directors of a quarterly dividend amounting to $573,000. COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND MARCH 31, 2005 General Net income was $1.3 million, or $0.14 per diluted share, for the quarter ended March 31, 2006 as compared to $1.5 million, or $0.16 per diluted share, for the same period in 2005. Net interest and dividend income was $5.8 million for the three months ended March 31, 2006 and $5.9 million for the same period in 2005. Net Interest and Dividend Income The following tables set forth the information relating to our average balance and net interest income at and for the three months ended March 31, 2006 and 2005 and reflect the average yield on assets and average cost of liabilities for the periods indicated. Yields and costs are derived by dividing interest income by the average balance of interest-earning assets and interest expense by the average balance of interest-bearing liabilities for the periods shown. Average balances are derived from actual daily balances over the periods indicated. Interest income includes fees earned from making changes in loan rates and terms and fees earned when real estate loans are prepaid or refinanced. <TABLE> <CAPTION> Three Months Ended March 31, 2006 2005 ---------------------------------- ---------------------------------- Average Avg Yield/ Average Avg Yield/ Interest Balance Cost Interest Balance Cost -------- ------- ---------- -------- ------- ---------- (Dollars in thousands) Interest-Earning Assets - ----------------------- <S> <C> <C> <C> <C> <C> <C> Short Term Investments $ 265 $ 24,555 4.32% $ 201 $ 34,360 2.34% Investment Securities 3,727 359,809 4.14 3,281 339,499 3.87 Loans 5,936 377,448 6.29 5,396 374,228 5.77 ------ -------- ------ -------- Total Interest-Earning Assets $9,928 $761,812 5.21% $8,878 $748,087 4.75% ====== ======== ====== ======== Interest-Bearing Liabilities - ---------------------------- NOW Accounts $ 160 $ 69,082 0.93% $ 72 $ 57,809 0.50% Savings Accounts 50 40,859 0.49 54 44,214 0.49 Money Market Accounts 483 124,314 1.55 451 147,106 1.23 Time Deposits 2,974 351,299 3.39 1,986 314,968 2.52 Customer Repurchase Agreements and Borrowings 483 59,115 3.27 400 61,075 2.62 ------ -------- ------ -------- Total Interest-Bearing Liabilities $4,150 $644,669 2.57% $2,963 $625,172 1.90% ====== ======== ====== ======== Net Interest Income/Interest Rate Spr $5,778 2.64% $5,915 2.85% ====== ==== ====== ==== Net Interest Margin 3.08% 3.21% ==== ==== </TABLE>
13 The following table shows how changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected Westfield Financial's interest income and interest expense during the periods indicated. Information is provided in each category with respect to: * Interest income changes attributable to changes in volume (changes in volume multiplied by prior rate); * Interest income changes attributable to changes in rate (changes in rate multiplied by current volume); and * The net change. The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate. <TABLE> <CAPTION> Three Months Ended March 31, 2006 compared to March 31, 2005 Increase (decrease) due to: --------------------------------------------- Interest-Earning Assets Volume Rate Net - ----------------------- ------ ---- --- (Dollars in thousands) <S> <C> <C> <C> Short Term Investments $ (57) $ 121 $ 64 Investment Securities 196 250 446 Loans 46 494 540 ----- ------ ------ Net Change in Income on Interest-Earning Assets 185 865 1,050 ----- ------ ------ Interest-Bearing Liabilities - ---------------------------- NOW Accounts 14 74 88 Savings Accounts (4) 0 (4) Money Market Accounts (70) 102 32 Time Deposits 229 759 988 Customer Repurchase Agreements and Borrowings (13) 96 83 ----- ------ ------ Net Change in Expense on Interest-Bearing Liabilities 156 1,031 1,187 ----- ------ ------ Change in Net Interest Income $ 29 $ (166) $ (137) ===== ====== ====== </TABLE>
14 Net interest and dividend income decreased $137,000 to $5.8 million for the three months ended March 31, 2006 from $5.9 million in the same period in 2005. The net interest margin was 3.08% for the three months ended March 31, 2006 as compared to 3.21% for the same period in 2005. The decrease in the net interest margin was primarily the result of higher funding costs. The average cost of interest-bearing liabilities increased 67 basis points to 2.57% for the three months ended March 31, 2006 from 1.90% for same period in 2005. The yield of interest-earning assets increased only 46 basis points to 5.21% for the three months ended March 31, 2006 from 4.75% for same period in 2005. The increase in the average cost of interest-bearing liabilities was primarily due to an increase in the cost of money market accounts and time deposits resulting from the rising interest rate environment. As the rates on time deposits have increased over the past several months, some customers have shifted funds out of core deposits, which generally pay lower rates, and into time deposits. In a period of rising interest rates, the more rate sensitive customers are expected to continue to shift funds into time deposits, resulting in a higher cost of deposits. Westfield Bank's net interest margin may be affected by the slope of the yield curve. A flat or inverted yield curve may result in a decrease in the net interest margin. Customer migration into time deposits, as discussed previously, and increased local competition for deposits may lead to higher deposit costs, which may also contribute to a decrease in the net interest margin. Provision for Loan Losses The appropriations of the allowance is reviewed by management based upon its evaluation of then-existing economic and business conditions affecting the key lending areas of Westfield Financial and other conditions, such as new loan products, credit quality trends (including trends in nonperforming loans expected to result from existing conditions), collateral values, loan volumes and concentrations, specific industry conditions within portfolio segments that existed as of the balance sheet date and the impact that such conditions were believed to have had on the collectibility of the loan portfolio. The amount that Westfield Bank provided for the provision for loan losses during the three months ended March 31, 2006 was based upon the changes that occurred in the loan portfolio during that same period. After evaluating these factors, the Bank provided $75,000 for loan losses for the three months ended March 31, 2006, compared to $140,000 for the same period in 2005. The allowance was $5.5 million at March 31, 2006 and $5.4 million at December 31, 2005. The allowance for loan losses was 1.43% of total loans at March 31, 2006 and 1.41% at December 31, 2005. At March 31, 2006 commercial real estate loans and commercial and industrial loans decreased $3.5 million as compared to December 31, 2005. Commercial real estate loans and commercial and industrial loans comprised 68.9% of the Bank's loan portfolio as of March 31, 2006 as compared to 70.2% as of December 31, 2005. The Bank considers these types of loans to contain more risk than conventional residential real estate mortgages, which increased by $6.0 million during the quarter ended March 31, 2006. Consumer loans decreased $539,000 to $6.9 million at March 31, 2006. Nonperforming loans were $2.1 million March 31, 2006 and $1.9 million at December 31, 2005. Net recoveries were $32,000 for the three months ended March 31, 2006. This was comprised of recoveries of $56,000 for the three months ended March 31, 2006, partially offset by charge-offs of $24,000 for the same period. Although management believes it has established and maintained the allowance for loan losses at adequate levels, future adjustments may be necessary if economic, real estate and other conditions differ substantially from the current operating environment.
15 Noninterest Income Noninterest income increased $105,000 to $853,000 for the three months ended March 31, 2006 from $748,000 in the same period in 2005. Service charge and fee income for the three months ended March 31, 2006 was $658,000, compared to $571,000 for the three months ended March 31, 2005. Net checking account processing fee income was $463,000 for the three months ended March 31, 2006 as compared to $390,000 for the same period in 2005. Noninterest Expense Noninterest expense for the three months ended March 31, 2006 was $4.8 million compared to $4.6 million for the same period in 2005. Salaries and benefits increased $271,000 to $3.0 million for the three months ended March 31, 2006. This was primarily the result of an increase in salary expense of $99,000 related to hiring additional personnel and normal salary increases, a $101,000 increase in employee benefit plan costs, along with an additional expense of $73,000 related to stock options. The Financial Accounting Standards Board now requires public and nonpublic companies to recognize stock-based compensation related to stock options in their income statements. This requirement became effective for Westfield Financial for the fiscal year beginning on January 1, 2006. In previous periods, Westfield Financial was not required to treat stock-based compensation related to stock options as an expense. Income Taxes For the three months ended March 31, 2006, Westfield Financial had a tax provision of $449,000 as compared to $430,000 for the same period in 2005. The effective tax rate was 25.5% for the three months ended March 31, 2006 and 22.2% for the same period in 2005. LIQUIDITY AND CAPITAL RESOURCES The term "liquidity" refers to Westfield Financial's ability to generate adequate amounts of cash to fund loan originations, loan purchases, withdrawals of deposits and operating expenses. Westfield Financial's primary sources of liquidity are deposits, scheduled amortization and prepayments of loan principal and mortgage-backed securities, maturities and calls of investment securities and funds provided by operations. The Bank also can borrow funds from the FHLB based on eligible collateral of loans and securities. The Bank's maximum additional borrowing capacity from the FHLB at March 31, 2006 was approximately $12.7 million. Liquidity management is both a daily and long term function of business management. The measure of a company's liquidity is its ability to meet its cash commitments at all times with available cash or by conversion of other assets to cash at a reasonable price. Loan repayments and maturing investment securities are a relatively predictable source of funds. However, deposit flow, calls of investment securities and repayments of loans and mortgage-backed securities are strongly influenced by interest rates, general and local economic conditions and competition in the marketplace. These factors reduce the predictability of the timing of these sources of funds. Management believes that Westfield Financial has sufficient liquidity to meet its current operating needs. At March 31, 2006, Westfield Financial exceeded each of its applicable regulatory capital requirements. As of March 31, 2006 the most recent notification from the Office of Thrift Supervision (the "OTS") categorized the Bank as "well capitalized" under the regulatory framework for prompt corrective action. To be categorized as "well capitalized" the Bank must maintain minimum total risk-based, Tier 1 risk based and Tier 1 leverage ratios as set forth in the following table. There are no conditions or events since that notification that management believes have changed the Bank's category. Westfield Financial's and the Bank's actual capital ratios of March 31, 2006 are also presented in the following table.
16 <TABLE> <CAPTION> Minimum To Be Well Minimum Capitalized For Capital Under Prompt Adequacy Corrective Actual Purposes Action Provisions Amount Ratio Amount Ratio Amount Ratio ------ ----- ------ ----- ------ ----- (Dollars in Thousands) <S> <C> <C> <C> <C> March 31, 2006 Total Capital (to Risk Weighted Assets): Consolidated $121,806 25.42% $38,338 8.00% N/A -- Bank 115,530 24.16 38,260 8.00 $47,825 10.00% Tier 1 Capital (to Risk Weighted Assets): Consolidated 116,277 24.26 19,169 4.00 N/A -- Bank 110,058 23.01 19,130 4.00 28,695 6.00 Tier 1 Capital (to Adjusted Assets): Consolidated 116,277 14.10 32,996 4.00 N/A -- Bank 110,058 13.43 32,782 4.00 40,977 5.00 December 31, 2005 Total Capital (to Risk Weighted Assets): Consolidated 122,241 25.68% 38,066 8.00% N/A -- Bank 105,516 22.31 37,833 8.00 $47,291 10.00% Tier 1 Capital (to Risk Weighted Assets): Consolidated 116,819 24.54 19,043 4.00 N/A -- Bank 100,151 21.18 18,917 4.00 28,375 6.00 Tier 1 Capital (to Adjusted Assets): Consolidated 116,819 14.48 32,261 4.00 N/A -- Bank 100,151 12.67 31,624 4.00 39,530 5.00 </TABLE> See the "Consolidated Statements of Cash Flows" in the Consolidated Financial Statements included in this Form 10-Q for the sources and uses of cash flows for operating, investing, and financing activities for the three months ended March 31, 2006 and March 31, 2005. The Bank also has outstanding, at any time, a significant number of commitments to extend credit and provide financial guarantees to third parties. These arrangements are subject to strict credit control assessments. Guarantees specify limits to the Bank's obligations. Because many commitments and almost all guarantees expire without being funded in whole or in part, the contract amounts are not estimates of future cash flows. The Bank is obligated under leases for certain of its branches and equipment. A summary of lease obligations and credit commitments at March 31, 2006 is followed:
17 <TABLE> <CAPTION> After 1 Year After 3 Years Within but Within but Within After 1 Year 3 Years 5 Years 5 Years Total ------ ------------ ------------- ------- ----- (In thousands) <S> <C> <C> <C> <C> <C> LEASE OBLIGATIONS Operating lease obligations $ 237 $ 309 $155 $ 296 $ 997 ======= ======= ==== ======= ======== BORROWINGS Federal Home Loan Bank $10,000 $30,000 $ -- $ 5,000 $ 45,000 ======= ======= ==== ======= ======== CREDIT COMMITMENTS Available lines of credit $44,714 $ -- $ -- $13,426 $ 58,140 Other loan commitments 29,276 9,016 -- -- 38,292 Letters of credit 4,995 -- -- 633 5,628 ------- ------- ---- ------- -------- Total credit commitments $78,985 $ 9,016 $ -- $14,059 $102,060 ------- ------- ---- ------- -------- Grand total $89,222 $39,325 $155 $19,355 $148,057 ======= ======= ==== ======= ======== </TABLE> OFF-BALANCE SHEET ARRANGEMENTS Westfield Financial does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on Westfield Financial's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table above) of total and Tier I capital to risk weighted assets and to adjusted total assets. Management believes, as of March 31, 2006, that the Bank met all capital adequacy requirements to which it was subject. As of March 31, 2006, the most recent notification from the Office of Thrift Supervision categorized the Bank as "well capitalized" under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios. There are no conditions or events since that notification that management believes have changed the Bank's category. Management uses a simulation model to monitor interest rate risk. This model reports the net interest income at risk primarily under seven different interest rate environments. Specifically, net interest income is measured in one scenario that assumes no change in interest rates, and six scenarios where interest rates increase 100, 200, and 300 basis points, and decrease 100, 200, and 300 basis points, respectively, from current rates over the one year time period following the current consolidated financial statements. Income from tax-exempt assets is calculated on a fully taxable equivalent basis. The changes in interest income and interest expense due to changes in interest rates reflect the rate sensitivity of our interest-earning assets and interest-bearing liabilities. For example, in a rising interest rate environment, the interest income from an adjustable rate loan is likely to increase depending on its repricing characteristics while the interest income from a fixed rate loan would not increase until the funds were repaid and loaned out at a higher interest rate.
18 The table below sets forth as of March 31, 2006 the estimated changes in net interest and dividend income that would result from incremental changes in interest rates over the applicable twelve month period. <TABLE> <CAPTION> For the Twelve Months Ending March 31, 2007 (Dollars in thousands) ------------------------------------------- Net Interest Changes in and Interest Rates Dividend (Basis Points) Income % Change -------------- ------------ -------- <S> <C> <C> 300 24,985 -2.6% 200 25,573 -0.3% 100 25,715 0.3% 0 25,648 -- -100 25,847 0.8% -200 26,071 1.6% -300 24,460 -4.6% </TABLE> Management believes that there have been no significant changes in market risk since December 31, 2005. The income simulation analysis was based upon a variety of assumptions. These assumptions include but are not limited to balance sheet growth, asset mix, prepayment speeds, the timing and level of interest rates, and the shape of the yield curve. As market conditions vary from the assumptions in the income simulation analysis, actual results will differ. As a result, the income simulation analysis does not serve as a forecast of net interest income, nor do the calculations represent any actions that management may undertake in response to changes in interest rates. ITEM 4: CONTROLS AND PROCEDURES Management, including Westfield Financial's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of Westfield Financial's disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), as of the end of the period covered by this report. Based upon the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective, to ensure that information required to be disclosed in the reports Westfield Financial files and submits under the Exchange Act (i) is recorded, processed, summarized and reported as and when required and (ii) accumulated and communicated to Westfield Financial's management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely discussion regarding required disclosure. There have been no changes in Westfield Financial's internal control over financial reporting identified in connection with the evaluation that occurred during Westfield Financial's last fiscal quarter that has materially affected, or that is reasonably likely to materially affect, Westfield Financial's internal control over financial reporting.
19 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 1A. RISK FACTORS There have been no material changes in the risk factors previously disclosed on Westfield's Form 10-K for the year ending December 31, 2005. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS The following table sets forth information with respect to purchases made by Westfield Financial of its common stock during the three months ended March 31, 2006. <TABLE> <CAPTION> Total number of shares Maximum purchased as number of shares Total number of part of publicly that may yet be shares Average price announced purchased under Period purchased paid per share($) programs the program - --------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> January 1-31, 2006 - - - February 1-28, 2006 65,000 24.36 65,000 March 1-31, 2006 - - - Total 65,000 24.36 65,000 99,862 </TABLE> In July 2004, Westfield Financial announced that the Board of Directors had approved a share repurchase program ("Repurchase Program 2") which authorized the repurchase of up to 502,550 shares. The Repurchase Program will continue until it is completed. There were no sales by Westfield Financial of unregistered securities during the three months ended March 31, 2006. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION a. None b. None
20 ITEM 6. EXHIBITS The following exhibits are furnished with this report: Exhibit Description - ------- ------------------------------------------------------------------ 2. Plan of Reorganization and Minority Stock Issuance of Westfield Mutual Holding Company, as amended. (1) 3. Articles of Organization of Westfield Financial, Inc. (1) 3.2 Bylaws of Westfield Financial, Inc. (1) 3.3 Amended and Restated Charter of Westfield Mutual Holding Company. (1) 3.4 Amended and Restated Bylaws of Westfield Mutual Holding Company. (1) 4.1 Articles of Organization of Westfield Financial, Inc. (See Exhibit 3.1) 4.2 Bylaws of Westfield Financial, Inc. (See Exhibit 3.2) 4.3 Form of Stock Certificate of Westfield Financial, Inc. (1) 10.1 Form of Employee Stock Ownership Plan of Westfield Financial, Inc. (1) 10.2 Form of the Benefit Restoration Plan of Westfield Financial, Inc. (5) 10.3 Form of Employment Agreement between Donald A. Williams and Westfield Financial, Inc. (1) 10.4 [Reserved] 10.5 Form of Employment Agreement between Michael J. Janosco, Jr. and Westfield Financial, Inc. (1) 10.6 Form of One Year Change in Control Agreement by and among certain officers and Westfield Financial, Inc. and Westfield Bank. (1) 10.7 Form of Directors' Deferred Compensation Plan. (5) 10.8 The SBERA 401(k) Plan adopted by Westfield Bank. (2) 10.9 Amendments to the Employee Stock Ownership Plan of Westfield Financial, Inc. (4) (6) 10.10 Form of Amended and Restated Deferred Compensation Agreement with Donald A. Williams. (5) 16.1 Letter regarding change on certifying accountants (4) 31.1 Rule 13a - 14(a)/15d - 14(a) Certifications 32.1 Section 1350 Certifications (1) Incorporated herein by reference to the Registration Statement No. 333-68550, on Form S-1 of Westfield Financial filed with the SEC on August 28, 2001, as amended. (2) Incorporated herein by reference to the Registration Statement No. 333-73132, on Form S-8, filed with the SEC on November 9, 2001, as amended. (3) Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 2002 as filed with the SEC on March 31, 2003. (4) Incorporated by reference to the Form 8-K filed with the SEC on June 21, 2004. (5) Incorporated by reference to the Form 8-K filed with the SEC on December 22, 2005. (6) Incorporated by reference to the Form 8-K filed with the SEC on August 25, 2005.
21 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Westfield Financial, Inc. (Registrant) By: /s/ Donald A. Williams -------------------------------- Donald A. Williams Chairman of the Board/Chief Executive Officer (Principal Executive Officer) By: /s/ Michael J. Janosco, Jr. -------------------------------- Michael J. Janosco, Jr. Vice President/Chief Financial Officer (Principal Accounting Officer) May 9, 2006